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The Banking and Financial Institutions (Microfinance Activities)

GN. No. 298

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GOVERNMENT NOTICE NO. 298 published on 22/08/2014

THE BANKING AND FINANCIAL INSTITUTIONS

(MICROFINANCE ACTIVITIES) REGULATIONS, 2014

ARRANGEMENT OF REGULATIONS

Regulation Title

PART I

PRELIMINARY PROVISIONS

1. Citation.

2. Application.

3. Interpretation.

4. Objectives.

PART II

CRITERIA FOR LICENSING MICROFINANCE BANKS

5. Application for Licence.

6. Principal contact person.

7. Grant of licence.

8. Legal Opinion.

9. Source of capital.

10. Integrity of shareholders.

11. Financial capacity.

12. Character and experience.

13. Assurance of capital.

14. Contribution to the country’s economy.

15. Disclosure of intended products and services.

16. Training and succession plan.

17. Feasibility studies.

18. Transforming microfinance institution.

19. Pre-licensing inspection for transforming microfinance institutions.

20. Management agreement.

21. Submission of Memorandum and Articles of Association.

22. Deposit of paid up capital.

23. Commencement of business.


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24. Undertaking by board members.

25. Opening of banking units and subsidiaries.

26. Supporting documentation.

27. Transformation into fully fledged bank.

PART III

ORGANIZATION, OWNERSHIP AND MINIMUM CAPITAL

28. Legal form and business name.

29. Board membership.

30. Appointment and change of Directors and management.

31. Employment of non-Tanzanians.

32. Restrictions on ownership.

33. Minimum capital.

34. Capital adequacy.

35. Available capital.

36. Subordinated debt.

37. Remedial measures.

PART IV

PERMISSIBLE ACTIVITIES AND PRUDENTIAL LIMITS

38. Permissible activities.

39. Single borrower’s limit.

40. Credit limit to single insider.

41. Aggregate credit limit to insiders.

42. Loans to Officers and Employees.

43. Placements with other banks or financial institutions.

PART V

LIQUIDITY MANAGEMENT

44. Liquidity management policies.

45. Contingency plans.

46. Minimum Liquid Assets Ratio.

47. Liquidity reporting.

48. Maturity profile.


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PART VI

MANAGEMENT OF RISK ASSETS

49. Risk management policies.

50. Unregistered collateral.

51. Restructuring of microfinance loans.

52. Review and classification.

53. Past due loans.

54. Classification of microfinance loans.

55. Classification by quantitative criteria.

56. Classification and security consideration.

57. Credit accommodations secured by cash or near cash items.

58. Classification of other receivables.

59. Classification of off balance sheet exposures.

60. Provisioning under International Financial Reporting Standards.

61. Specific provisions.

62. Additional provisions.

63. Impairment for other assets.

64. Suspension of interest on non-performing credit accommodations.

65. Annual provision approval by the Bank.

66. Fair lending practices

PART VII

GENERAL PROVISIONS

67. Submission of monthly report.

68. Reporting requirements.

69. Compliance with other regulations.

70. Sanctions.

71. Revocation .

_______

SCHEDULES

______


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THE BANKING AND FINANCIAL INSTITUTIONS ACT

(CAP 342)

_______

REGULATIONS

_______

(Made under section 71)

_______

THE BANKING AND FINANCIAL INSTITUTIONS

(MICROFINANCE ACTIVITIES) REGULATIONS, 2014

PART I

PRELIMINARY PROVISIONS Citation 1. These Regulations may be cited as the Banking and

Financial Institutions (Microfinance Activities) Regulations,

2014. Application 2. These Regulations shall apply to microfinance banks

and other banks and financial institutions engaged in

microfinance activities. Interpretation 3. In these Regulations unless the context otherwise

requires-

“Act” means the Banking and Financial Institutions Act;

“Bank” means the Bank of Tanzania;

“bank” has the meaning ascribed to it in the Act;

“banking business” has the meaning ascribed to it in the Act;

“connected party” has the meaning ascribed to it in the Act;

“core capital” has the meaning ascribed to it in the Act;

“credit accommodation” means loans, overdrafts and

advances, leasing, acceptances, performance and bid

bonds, letters of credit, guarantees, foreign exchange

contracts or any other form of a direct or indirect

financial obligation including interest due and unpaid

to an institution;


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“demand liabilities” include current account deposits, time

deposits, savings deposits, deposits of banks,

interbank borrowings payable at call or within seven

days, banker’s cheques and drafts issued, payment

orders and transfers payable, foreign currency

deposits and borrowings, other deposits, off balance

sheet commitments maturing within one year and

such other liabilities as the Bank may determine;

“deposit” has the meaning ascribed to it in the Act;

“financial institution” has the meaning ascribed to it in the

Act;

“fit and proper person” means a person with the attributes

required of a member of the board of directors and

management of a bank or financial institution as per

the criteria set out in the First Schedule to these

Regulations;

“liquid assets” include-

(a) cash;

(b) current account balances and currency deposits

with the Bank as shown in the books of the

Bank;

(c) balances with other banks with maturities of

seven days or less or withdrawable on demand;

(d) cheques and items for clearing;

(e) uncommitted balances with banks outside the

United Republic withdrawable on demand and

money at call outside Tanzania after deducting

there from balances owed to banks outside the

United Republic;

(f) foreign currency notes and coins including gold,

treasury bills and other government securities

maturing within one year and as long as they are

unencumbered;

(g) commercial bills and promissory notes

discounted at the Bank; and

(h) such other assets as the Bank may determine;


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“microfinance activities” means a business involving-

(a) accepting deposits from the public;

(b) employing deposits wholly or partly in lending

or extending credit for the account and at the

risk of the person accepting those deposits,

including the provision of short term loans to

small or micro enterprises and low income

households, usually characterized by the use of

collateral substitutes, such as group guarantees

or compulsory savings; and

(c) transacting such other activities as may be authorized

by the Bank;

(d)

“microfinance bank” means a bank or financial institution

which is licensed by the Bank to undertake banking

business mainly with individuals, groups and micro

and small enterprises in the rural or urban areas;

“micro-enterprise” has the meaning ascribed to it in the Act;


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“microfinance institution” means an institution engaged in

provision of microfinance loans and which is not

regulated by the Bank;

“microfinance loan” means a credit accommodation with the

following features-

(a) its security may include non-traditional

collateral;

(b) is granted to a natural person, individually or in a

group, or to a firm, whose income is derived from

business activities involving the production or

sale of goods or the provision of services;

(c) is not necessarily supported by formal financial

or non-financial records or documentation

detailing the income or repayment capacity of the

borrower or by registered collateral; and

(d) is granted on the basis of the borrower’s

character or willingness to repay and the

combined cash flows of the borrower’s business

and household,

and it includes microcredit, microenterprise credit or micro

loan;

“related party”

(a) in relation to a body corporate means-

(i) its holding company or its subsidiary;

(ii) a subsidiary of its holding company;

(iii) a holding company of its associates;

(iv) any person who controls the company or

body corporate whether alone or with his

related party or with other related parties of

it; and


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(b) in relation to an individual means-

(i) any member of his family;

(ii) any company or other body corporate

controlled directly or indirectly by him

whether alone or with his related parties; and

(iii) any related party of his related parties,

and it includes connected party;

“restructured credit accommodation” means a credit

accommodation whose terms and conditions have

been modified in terms of repayment period,

repayable amount, installments or rate of interest

due to economic or other reasons relating to the

borrower’s financial difficulty;

“senior management” in relation to a bank or financial

institution means a Chief Executive Officer, heads of

function, any other senior manager reporting to the

Chief Executive Officer and any other person, other

than members of the board of directors, who,

individually or as a group-

(a) makes or participates in making decisions that

affect the whole or a substantial part of the

business of the bank of financial institution;

(b) has the capacity to affect the bank’s or financial

institution’s financial standing; or

(c) may affect the whole, or a substantial part, of the

business of the bank or financial institution or its

financial standing through their responsibility

for-

(i) enforcing policies and implementing

strategies approved by the Board of the

bank or financial institution;

(ii) developing and implementing systems that

identify, assess, manage or monitor risks in

relation to the business of the bank or

financial institution; or

(iii) monitoring the appropriateness, adequacy


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and effectiveness of risk management

systems;


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“supplementary capital” has the meaning ascribed to it in the

Act; and

“total capital” has the meaning ascribed to it in the Act.

Objectives 4. The objectives of these Regulations shall be-

(a) provide operational framework for microfinance

banks including permissible activities, prudential

limits and related parties transactions;

(b) provide a framework for other banks and financial

institutions to conduct microfinance activities; and

(c) ensure that micro finance business is conducted in

a safe and sound manner.

PART II

CRITERIA FOR LICENSING MICROFINANCE BANKS Application

for Licence 5.-(1) A person who intends to engage in microfinance

activities as a microfinance bank shall, by a letter in the form

prescribed in the Second Schedule, apply for a license to the

Bank.

(2) Any person shall, before submitting an application

referred to under sub-regulation (1), apply for a pre-filing

meeting with the Bank.

(3) An application referred to under sub-regulation (1)

shall be signed by the directors of the applicant or a person

authorized by the applicant and be accompanied with-

(a) a copy of each of the documents listed in the Third

Schedule; and

(b) non-refundable application fee of ten million

shillings or any other amount as may be determined

by the Bank to be paid through a bankers’ cheque or

other means acceptable to the Bank.

(4) A person shall not engage in microfinance activities

unless that person has obtained a license issued by the Bank.

(5) A person who contravenes the provision of sub-

regulation (4) commits an offence and on conviction shall be

liable to the punishment stipulated in the Act.

Principal 6. An applicant for a license shall designate a


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contact person principal contact person for the purposes of application

processes and inform the Bank of the name and address of

such a person.

Grant of licence 7.- (1) The Bank shall-

(a) within ninety days after receipt of a complete

application; or (b) where additional information has been required,

after receipt of such information,

grant a licence or reject the application;

(2) Where the Bank has rejected the application it

shall inform the applicant in writing explaining the grounds

for rejection.

(3) An applicant whose application has been rejected

may reapply, if the deficiencies that formed the basis for

rejection of the initial application or subsequent review have

been corrected or otherwise addressed.

(4) When a licence is issued, it shall remain in force

unless suspended or revoked in the manner provided in the

Act.

Legal Opinion 8. The Bank may require the applicant to provide

legal opinion on any issue related to the application of the

license as it may determine. Source of

capital 9. The applicant shall provide-

(a) a written proof of sources of funds; and

(b) a written confirmation that the proposed paid up

capital shall be fully paid up prior to

commencement of operations.


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Integrity of

shareholders 10. The Bank shall consider the history of the

proposed shareholders in assessing the applicant’s

reputation, experience in banking operations, financial

soundness and integrity in past and present business

practices. Financial

capacity 11.-(1) The Bank shall evaluate the financial capacity

of the applicant.

(2) The soundness of an applicant’s financial position,

his business affiliates and the financial condition of those

business affiliates shall be measured on-

(a) levels of capital as shown on balance sheets; and

(b) the potential financial support that may be made

available when the microfinance bank require

capital injection.

(3) The Bank shall assess-

(a) the ability of the applicant and his business

affiliates to pay their current obligations from

their income;

(b) reasonability of valuation they assign to their

assets; and

(c) net-worth in relation to other liabilities.

(4) The Bank shall establish that shares in a

microfinance bank are not acquired with borrowed money.

(5) Sub-regulation (4) shall not apply to a

microfinance bank going public, provided that shares to be

acquired at the Initial Public Offer stage shall not be

pledged as collateral.

Character and

experience 12.-(1) The Bank shall make an assessment as to

whether the proposed members of the Board of Directors

and senior management of a proposed microfinance bank

are fit and proper in accordance with the criteria set out in

the First Schedule.

(2) Without prejudice to sub-regulation (1) the Bank

shall-

(a) evaluate the proposed members of the Board of

Directors and senior management team with

respect to their experience and ability to manage


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funds, institute proper credit evaluation,

collection procedures, accounting systems,

effective internal controls, audit programmes and

management information systems;

(b) make an assessment of proposed board and senior

management team members regarding their

formal education, professional qualifications,

work experience, reputation, criminal record and

conflict of interest;

(c) require board and senior management team to

comprise people of sufficiently strong character

who are able to oversee the microfinance bank’s

operations effectively by having the requisite

microfinance or banking business experience; and

(d) assess whether individuals proposed as board and

senior management team members have the

necessary administrative, organizational and

decision-making skills, and ability to demonstrate

reliability and sound character;

(3) The Bank may interview the proposed board and

senior management team members and enquire as to past

performance, reputation and skills.

(4) For the purpose of the assessment referred to in

this regulation, the proposed directors and senior managers

shall complete the questionnaire in the Fifth Schedule to

these Regulations.

Assurance of

capital 13. A shareholder of a proposed microfinance bank

shall provide to the Bank an assurance that the proposed

paid up capital shall be fully paid before commencement of

banking operations. Contribution to

the country’s

economy

14.-(1) An applicant for a license shall

communicate to the Bank intention of the proposed

institution in contributing towards the country’s economic

development. (2) The Bank shall, when making an evaluation of

the application, take into account the extent to which the

business strategy, policies and outreach plans of the


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applicant are designed to enhance financial inclusion by

directly or indirectly promoting the financial or economic

activities in the rural sector including agriculture, rural-

based industries, mining and tourism. Disclosure of

intended

products and

services

15.-(1) An applicant shall indicate in the business

plan the financial products and services he intends to

provide and how such products and services shall be

beneficial to the country. (2) A microfinance bank shall, before introducing a

new product or service in the market, obtain prior approval

of the Bank (3) When seeking for the approval under sub-

regulation (2), a bank of financial institution shall submit to

the Bank the description of the product or service, risk

inherent in it and mitigation strategies. Training and

succession plan 16.-(1) An applicant shall submit a training plan

indicating specific time frames for imparting banking and

microfinance skills and expertise to staff. (2) The applicant shall submit a succession plan and

strategies on mode, time and contents of the extent to which

Tanzanian staff shall occupy senior management positions

in the microfinance bank. Feasibility

studies 17.-(1) An applicant for a license shall provide

details of a feasibility study, business plan and projected

balance sheets, income statements and cash-flow statements

for four years. (2) The applicant shall, at minimum, provide- (a) draft policies and procedural manuals

establishing how the microfinance bank shall

operate in a manner consistent with the

principles established in Risk Management

Guidelines for Banks and Financial Institutions

issued by the Bank; (b) description of accounting system and

information and communication technology to

be used in the operations of the microfinance


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bank and proposed future investment; (c) number of employees, job descriptions of senior

management positions and an organization

chart; (d) description of internal control procedures that

the microfinance bank shall implement; (e) narrative description of shareholders, board and

senior management of the microfinance bank; (f) plans and strategies for promoting and

supporting financial inclusion in the rural areas;

and (g) sources of funds of shareholders and

subscribers. (3) The business plan referred to under sub-

regulation (1) shall be prepared in accordance with the

guidelines provided in the Fourth Schedule. (4) A microfinance bank shall, when changes are

made to its key policies set out in the Sixth Schedule of

these Regulations or organization chart, submit copies of

revised policies or organization chart to the Bank not later

than thirty days after they are approved by the Board of

Directors.

(5) When a microfinance bank submits a revised copy

of policy or organisation structure referred to under sub-

regulation (4), it shall clearly indicate areas of change.

Transforming

microfinance

institution

18. A microfinance institution that intends to transform

into a microfinance bank shall, in addition to the

information required under regulation 5, provide the

following information- (a) resolution of the Board and shareholders approving

the transformation and the proposed investment;

and (b) a due diligence report prepared by an external audit

firm or any other approved independent body on

the operational and financial performance, legal

risks and a detailed review of the adequacy of

management information and system of internal

controls.


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Pre-licensing

inspection for

transforming

microfinance

institutions

19. The Bank shall carry out an on-site inspection of

a microfinance institution that intends to transform into a

microfinance bank to confirm the following-

(a) evidence of availability of capital to meet the

minimum capital requirements as specified in

these Regulations;

(b) appropriateness of the business premises

including the head office and existing

branches; and

(c) adequacy of management information system,

administrative and operational processes and

internal control system.

Management

agreement 20. A management or technical assistance agreement

involving a microfinance bank shall be subject to prior

approval of the Bank and governed by the laws of Tanzania. Submission of

Memorandum

and Articles of

Association

21. -(1) A microfinance bank shall submit to the

Bank a copy of its Memorandum and Articles of

Association after registration by the Registrar. (2) A microfinance bank shall not, without obtaining

prior written approval of the Bank, amend its Memorandum

and Articles of Association. Deposit of paid

up capital 22. A microfinance bank shall, not later than thirty

days or any other period to be specified by the Bank after

grant of the licence, deposit its paid up capital either in

Tanzanian Shillings or in foreign currency, in a Tanzanian

registered bank or financial institution, or in Treasury Bills

and other Government securities of maturity not more than

364 days held with the Bank. Commencement

of business 23-(1) A microfinance bank shall commence its

operations within twelve months from the date the licence

was granted, unless such period is extended in writing by

the Bank.


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(2) A microfinance bank shall not commence

business unless its business premises, security facilities,

communication facilities, processing equipment, accounting

and internal control systems are in place and have been

inspected or reviewed by the Bank. Undertaking by

board members 24. Every member of the Board of Directors of a

microfinance bank shall- (a) execute a legally binding undertaking to fulfil

his obligations towards maintaining a safe,

sound and profitable institution; and (b) undertake to comply with the provisions of the

Act, Bank of Tanzania Act, and other laws,

regulations, policies, circulars, orders and

instructions made there under. Opening of

banking units

and subsidiaries

25.-(1) A microfinance bank shall not invest in

capital expenditure for the purpose of opening a

representative office, subsidiary, branch, agency or

additional office in or outside the United Republic unless it

has obtained the prior approval of the Bank. (2) The Bank may approve an application for

opening a subsidiary, branch, agency or additional office

after proven successful, sound and profitable operations and

it may, as a condition for approval, require additional

capital. Supporting

documentation 26. An application for establishment of a

subsidiary, branch, agency or an additional office shall be

supported by- (a) projected balance sheet and income statement

for the next three years; (b) consolidated projected balance sheet and

income statement for the next three years; (c) proposed organization structure; (d) detailed budget and programme for the

establishment; (e) names and particulars, including curriculum

vitae for persons proposed to take up senior


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positions; and (f) any other information the Bank may require. Transformation

into fully

fledged bank

27. A microfinance bank may transform into a

fully-fledged bank subject to prior approval of the Bank.

PART III

ORGANIZATION, OWNERSHIP AND MINIMUM CAPITAL

Legal form and

business name 28. A microfinance bank shall be organized in the

form of a company limited by shares and incorporated under

the laws of the United Republic and incorporate the words

“Microfinance Bank” in its business name. Board

membership 29.-(1) The Board of Directors of a microfinance

bank shall be composed of not less than five members who

have experience related to finance, business,

microenterprise or law, two thirds of whom shall be non-

executive. (2) Two of the non-executive board members

referred to under sub-regulation (1) shall be independent

and have microfinance experience. (3) The chairperson of a Board of Directors of a

microfinance bank shall be a non-executive member of the

board. (4) The chairperson of a Board of Directors of a

microfinance bank shall not be a member of audit

committee or credit committee of the board. Appointment

and change of

Directors and

management

30.-(1) A microfinance bank shall not appoint any

person as senior manager or board member and assign that

person responsibilities unless it has obtained prior approval

of the Bank.

(2) The chief executive officer of a microfinance

bank shall have a satisfactory record of experience in

managing an institution specialized in microcredit or in

financial intermediation.


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(3) Where a post of senior management or member

of the Board of Directors is vacant, a microfinance bank

shall in writing and within seven days notify the Bank of the

vacancy provided that a post of senior management or

member of the Board of Directors shall be deemed to be

vacant if a person who holds such position is dismissed,

resigns, incapacitated or for any other reason that person

ceases to hold such posts.

Employment of

non-Tanzanians 31.-(1) A microfinance bank shall not employ a

non-Tanzanian or renew any contract of such a person

unless it seeks and obtains prior approval of the Bank. (2) The number of non-Tanzanians in the

microfinance bank shall not exceed five at any time. (3) Subject to sub-regulation (2), any application

for an extra person shall be submitted to the Bank which

may authorise any additional person, taking into

consideration the following- (a) availability of qualified Tanzanians for the

proposed position; (b) complexity of the functions and roles to be

undertaken; (c) approval granted by Tanzania Investment

Centre; (d) emergency situation which may warrant extra

person; and (e) the timeframe the extra person is expected to

stay in the microfinance bank and impart

knowledge to Tanzanians. Restrictions on

ownership 32.-(1) A person shall not directly or indirectly

own or control a beneficial interest of more than twenty

percent of the voting shares of any microfinance bank,

except as provided under section 15 of the Act. (2) For the purpose of sub-regulation (1) indirect

ownership or control shall mean ownership or control

through related parties. (3) The Bank may authorize a body corporate to

own up to sixty-six per cent of the share capital of a


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microfinance bank, if that the body corporate has- (a) sufficient financial resources; and

(b) a proven track record of at least ten years in

lending to households, small holder farmers

or small or microenterprises of the urban or

rural sector,

provided that where a body corporate is a

microfinance institution which intends to

transform into a microfinance bank, it shall

phase out its commercial lending operations.

(4) A body corporate may transfer its lending

portfolio or other assets to a microfinance bank if such

portfolio or other assets have been assessed by an

independent party and consideration for the transferred

portfolio or assets is by issuance of new shares. (5) The Bank shall subject to a “fit and proper test”,

and require disclosure of, all proposed shareholders whose

participation exceeds five percent of the equity of the

microfinance bank. Minimum

capital 33.-(1) A microfinance bank shall commence

operations with and maintain at all times a minimum core

capital of not less than five billion shillings or such higher

amount as the Bank may prescribe.

(2) Where capital is remitted in foreign currency, it

shall be reflected in the books of the microfinance bank in

Tanzanian shilling using exchange rate prevailing on the

date of remittance. Capital

adequacy 34.-(1) A microfinance bank shall at all times

maintain a minimum- (a) core capital of not less than twelve and one half

per cent of its total risk-weighted assets and off

balance sheet exposure; and (b) total capital of not less than fourteen and one half

per cent of its total risk weighted assets and off

balance sheet exposure. (2) The total risk-weighted assets and total risk-

weighted off balance sheet exposures shall be determined in


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accordance with procedures stipulated by the Bank. Available

capital 35. In determining the amount of available capital

for the purposes of computing the minimum capital

required under regulations 33, the microfinance bank shall

consider the following- (a) fifty per cent of the year-to-date profits where

accounts are unaudited; or (b) one hundred percent of the year-to-date profits

where accounts have been audited subject to

submission of the signed accounts to the Bank;

and (c) amount of the investment of the microfinance

bank in the capital of another company, firm,

entity or subsidiary to the extent of the

reciprocal investment of such company, firm,

entity or subsidiary in the capital of the

microfinance bank shall be deducted from the

capital of that microfinance bank. Subordinated

debt 36. The aggregate amount of subordinated debt that

may be eligible and recognized by the Bank as

supplementary capital is limited to fifty percent of core

capital, provided that such subordinated debt shall-

(a) be discounted by a cumulative factor of twenty

percent per year during the last five years to

maturity;

(b) be unsecured, uninsured and are not a deposit;

(c) have an original maturity of not less than five

years;

(d) be subordinated to claims of all depositors and

general creditors of the microfinance bank ; (e) not be redeemable at the option of the holder

prior to maturity, except with the prior

approval of the Bank; and (f) have no requirement for payments of principal

or interest except to the extent that the

microfinance bank is solvent and shall remain

solvent immediately thereafter.


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Remedial

measures 37. Where, in the opinion of the Bank, a

microfinance bank is undercapitalized, the Bank shall take

measures prescribed in the Banking and Financial

Institutions (Prompt Corrective Action) Regulations, to

address the undercapitalization and nothing in such

Regulations or these Regulations shall preclude the Bank

from taking other remedial measures provided by the Act.

PART IV

PERMISSIBLE ACTIVITIES AND PRUDENTIAL LIMITS

Permissible

activities 38.-(1) A microfinance bank may, subject to any

condition or regulation which the Bank may prescribe,

perform any of the following activities as primary function- (a) accepting saving deposits from the public; (b) accepting fixed or time deposits from the

public; (c) accepting special deposits, such as from a

development bank, wholesale financial

institution, or government; (d) issuing microfinance loans to individuals,

groups of individuals, micro and small

enterprises, including microfinance guarantees; (e) issuing housing microfinance products to

individuals, micro and small enterprises; (f) making remittances, payment orders, collection

of payment instruments, safe custody and

transfer of funds for its clients; (g) provision of payment services such as salaries

and pensions; (h) provision of loan disbursement services for the

delivery of credit programme of government,

agencies, groups and individual for poverty

alleviation on non-recourse basis; (i) maintenance and operation of various types of

accounts with other banks in Tanzania; (j) operation of micro leasing facilities, micro

finance related hire-purchase and arrangement


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of consortium lending and supervision of credit

schemes to ensure access of micro finance

customers to inputs for their economic

activities; (k) provision of professional advice to customers

regarding investments in small businesses;

rendering managerial, marketing, technical and

administrative advice to customers and

assisting them in obtaining services in such

fields; (l) raising funds from the public or from other

refinancing sources; and (m) such other activities as may be authorized by

the Bank. (2) A microfinance bank shall not engage in any of

the following activities unless allowed by the Bank and

subject to these Regulations- (a) operating current account for clients; (b) foreign exchange business; (c) foreign trade finance; (d) trust operations; (e) equity investment; (f) participation in the underwriting and

placement of securities; (g) purchase or acquisition of any land or any

interest or right therein except as may be

reasonably necessary for the purpose of

conducting its business, where such

investments do not exceed such proportion of

its core capital as may be prescribed by the

Bank; (h) international commercial papers; (i) dealing in land for speculative purposes; (j) investing in real estate except for its use as

office accommodation; and (k) extending loans for the account and at the risk

of another person or institution. (3) Where the Bank grants a license to a

microfinance bank it may impose terms and conditions as it


GN. No. 298

24

may deem appropriate, including temporary or permanent

restrictions regarding the individual or total amounts of

credit accommodations or the engagement in any activities

or operations. Single

borrower’s limit 39. A microfinance bank shall not directly or

indirectly grant to any person and his related parties, credit

accommodation the value of which exceeds three percent of

core capital. Credit limit to

single insider 40.-(1) The total amount of credit accommodation

which any microfinance bank may grant, directly or

indirectly, to any insider shall not exceed two percent of the

core capital of the microfinance bank. (2) The limit prescribed under sub-regulation (1)

shall apply regardless of the type and value of security held. Aggregate credit

limit to insiders 41.-(1) A microfinance bank shall not, directly or

indirectly, grant to its insiders credit accommodations

whose aggregate amount exceeds twenty percent of its core

capital.

(2) The limit referred to under sub-regulation (1)

shall apply to a person who has ceased to be an insider

unless two years have elapsed from the date when such a

person ceased to be an insider. Loans to

Officers and

Employees

42.-(1) A microfinance bank shall not grant salary

advances to any of its officers and employees, which

exceed the annual remuneration of the borrowing officer or

employee. (2) For purposes of sub regulation (1) the annual

remuneration of an officer or employee shall be the basic

salary plus fixed allowances paid in cash to the officer or

employee on a regular and periodic basis as part of his

compensation for services rendered to the microfinance

bank. (3) The provisions of sub-regulation (2) shall not

apply to benefits or entitlement which depends on a

contingency such as medical and hospitalization benefits or


GN. No. 298

25

allowances for attending seminars, meeting or other non-

cash benefits. (4) Loans and advances to officers and employees

of microfinance bank granted as incentives shall be

managed in accordance with a well-documented policy

regarding administration of such facilities. (5) Commercial loans and advances to officers and

employees of a microfinance bank shall be in the regular

course of business and on the terms not more favorable than

would be available to other borrowers. Placements with

other banks or

financial

institutions

43. A microfinance bank shall not deposit in a

single bank, financial institution or microfinance bank, an

amount exceeding twenty five per cent of its core capital.

PART V

LIQUIDITY MANAGEMENT

Liquidity

management

policies

44.- (1) The Board of Directors of a microfinance

bank shall adopt sound and prudent liquidity management

and funding policies which are consistent with the

principles set out in the Risk Management Guidelines for

Banks and Financial Institutions issued by the Bank.

(2) The policies referred to under sub-regulation (1)

shall at minimum include-

(a) delegation of responsibility for management of

overall liquidity of the microfinance bank to a

specifically identifiable group, which may be

known as the Asset and Liability Management

Committee; (b) establishment and implementation of effective

techniques and procedures to identify, measure,

monitor and manage liquidity risk both in

individual currencies and overall; (c) requirement to conduct maturity mismatch

analysis consistent with principles set forth in

the Risk Management Guidelines for Banks and

Financial Institutions issued by the Bank; (d) analysis of net funding requirements under


GN. No. 298

26

alternative scenarios; and (e) contingent liquidity planning. Contingency

plans 45-(1) A microfinance bank shall submit to the

Bank a copy of the contingency plan for dealing with

liquidity stress scenarios approved by its board of directors.

(2) The contingency plan referred to under sub-

regulation (1) shall, at minimum , include-

(a) identification of a crisis management team and

provision to notify the Bank promptly of

emerging liquidity problems;

(b) procedures to ensure that all necessary

information is available to enable senior

management to make quick decisions including

mechanisms to facilitate constant monitoring

and reporting of signals;

(c) procedures for funding cash flow shortfalls in

crisis situations, including expected sources of

funds, an assessment of the cost of alternative

funding strategies and the impact on the capital

of the bank and

(d) communication strategies to deal with staff,

customers and the public, including the media.

Minimum

Liquid Assets

Ratio

46. A microfinance bank shall maintain minimum

liquid assets amounting to not less than twenty percent of

its demand liabilities. Liquidity

reporting 47. A microfinance bank shall submit to the Bank

liquidity reports in the format and frequency prescribed by

the Bank. Maturity profile 48. A microfinance bank shall prepare a maturity

profile of its assets and liabilities in the format and

frequency prescribed by the Bank.

PART VI


GN. No. 298

27

MANAGEMENT OF RISK ASSETS Risk

management

policies

49.-(1) The board of directors of an institution

engaged in microfinance activities shall develop

appropriate policies on risk management and be fully

responsible and accountable for the execution of such

policies. (2) The policies under sub-regulation (1) shall at

least include a credit policy establishing a framework for

making credit and investment decisions consistent with

principles set forth in the Risk Management Guidelines for

Banks and Financial Institutions, including- (a) a system for measuring and monitoring credit

risk; (b) internal risk rating system; (c) provisioning standards; (d) procedures for identifying risk concentration; (e) internal limits on risk concentration including

corresponding controls and approval

procedures in conformity with legal and

supervisory limits; (f) periodic review of the effectiveness of

monitoring and reporting systems for risk

concentration; and (g) maximum amounts that can be approved at

every level of discretion, as well as the

documentary and procedural requirements and

the internal controls to be maintained. (3)The Board of Directors of an institution engaged

in microfinance activities shall review the credit policy on

annual basis or more frequently as may be necessary to

ensure that they remain appropriate and prudent. (4) The policy referred to under sub-regulation (3)

shall be submitted to the Bank not later than thirty days

after being approved by the Board, provided that where any changes are made to the policy,

the institution engaged in microfinance activities shall

clearly indicate areas of such changes. Unregistered 50. An institution engaged in microfinance


GN. No. 298

28

collateral activities may extend credit accommodations secured

against un registered collateral or non-traditional security or

collateral substitute, such as personal guarantees,

contractual pledging of home or business assets,

compulsory savings or group guarantees where members

jointly guarantee each other’s loans.

Restructuring of

microfinance

loans

51-(1). An institution engaged in microfinance

activities shall put in place clear and comprehensive

policies specifically addressing circumstances and

conditions under which microfinance loans may be

restructured. (2) The restructured non performing microfinance

loan shall not be upgraded into better classification unless

new repayment schedule has been fully complied with and

the borrower has paid at least four installments

consecutively. (3) Restructured microfinance loans shall be

classified as substandard and be reclassified as loss upon

being restructured for a second time. Review and

classification 52.-(1) An institution engaged in microfinance

activities shall review and classify its outstanding

microfinance loans and other risk assets including

contingent accounts or off balance sheet items at least once

in every quarter. (2) An institution engaged in microfinance activities

shall, at every quarterly review, charge off all microfinance

loans and other risk assets that have remained in the loss

category for four consecutive quarters.

Past due loans 53.-(1) A microfinance loan with specific repayment

date shall be considered as past due in its entirety if any of

its contractual obligation for payment has become due and

unpaid.

(2) Microfinance loans which are payable in

installments are considered past due in their entirety if any

of the installments has become due and unpaid for one day

or more. (3) A group loan shall be accounted as past due in


GN. No. 298

29

its entirety, when any of the members of the group defaults

and the amount due is not covered by the members of the

group. Classification of

microfinance

loans

54. A microfinance loan shall be classified into the

following categories-

Current;

Especially Mentioned;

Substandard;

Doubtful; and

Loss Classification by

quantitative

criteria

55. A microfinance loan shall, by quantitative

criteria, be classified as follows-

Number of days past due Classification

0 to 5 days Current

6 to 30 days Especially Mentioned

31 to 60 days Substandard

61 to 90 days Doubtful

More than 90 days Loss

Classification

and security

consideration

56. The criteria for classifying credit

accommodations shall apply regardless of the type of

security held. Credit

accommodations

secured by cash

or near cash

items

57. Credit accommodations which are fully secured,

in respect of principal and interest, by cash or treasury bills,

notes or bonds, or other instruments as the Bank may

approve, shall be classified on the same basis as other credit

accommodations, provided that provision against such accommodations may

be required where the security is the object of an adverse

claim.

Classification of 58.-(1) All receivables, except accrued interest


GN. No. 298

30

other

receivables receivable, shall be classified as follows-

Number of days past due Classification

31-60 Especially Mentioned

61-90 Substandard

91-120 Doubtful

121 or more Loss

(2) Sundry debts and other accounts receivable

arising from loans shall have the same classification as their

respective loan accounts. (3) Inter-office or inter-branch items, suspense

accounts, frauds, shortages, uncleared effects,

miscellaneous intangible assets and other assets not

specially treated in these Regulations, shall be classified as

in sub-regulation(1). Classification

of off balance

sheet

exposures

59.-(1) An institution engaged in microfinance

activities shall, in undertaking review and appraisal of its

off balance sheet commitments such as guarantees,

indemnities, performance bonds, commercial letters of

credit, deferred letters of credit, and other contingent items,

observe the same procedure and regulations prescribed for

loans. (2) The off balance sheet items under sub-

regulations (1) shall be grouped into current, especially

mentioned, substandard, doubtful or loss categories. Provisioning

under

International

Financial

Reporting

Standards

60.-(1) Notwithstanding the requirements of

International Financial Reporting Standards, an institution

engaged in microfinance activities shall classify credit

accommodations and other assets and establish specific

provisions not less than those specified in these

Regulations.

(2) Where the provisions computed in accordance

with International Financial Reporting Standards are less

than those required by these Regulations, a special non-

distributable reserve shall be created through an

appropriation of distributable reserve to eliminate the

shortfall.


GN. No. 298

31

Specific

provisions 61. The minimum amount of specific provisions for

credit accommodations shall be based on the following

schedule-

Classification Provision

Current One percent

Especially Mentioned Five percent

Substandard Twenty five percent

Doubtful Fifty percent

Loss One hundred percent

Additional

provisions 62.-(1) The Bank shall periodically review the

amount of allowance for probable losses. (2) The Bank may prescribe additional provisions

for loan losses in excess of the minimum provisions

specified under regulation 61 for the purpose of mitigating

any additional risk represented by weak or inadequate

internal controls or internal audit. (3) Notwithstanding the provisions of sub-

regulations (2), the Bank, the internal auditor or the external

auditor shall establish additional provisions to cover risks

arising from- (a) non-adherence to lending policies or procedures

regarding loan amounts or conditions, levels of

discretion in the approval of loans, separation of

duties, loan documentation or administration, for

up to five percent of the total portfolio; (b) lack of observance by loan officers, other

personnel or senior officers, of sound lending

practices or of lending policies or procedures

established by the Board of Directors, for an

amount of up to one percent of the total

portfolio for every ten percent of transgressions

detected in a statistically representative sample;

and (c) significant deterioration of the payment

performance of the clients with respect to other


GN. No. 298

32

providers of credit.

(4) Additional provisions referred to in sub-

regulation (3), shall be booked within ninety days, unless

satisfactory evidence is presented to the Bank, internal or

external auditor, to the effect that the situation has been

overcome or placed under control. Impairment for

other assets 63. A microfinance bank shall, in accordance with

International Financial Reporting Standards, value all types

of assets not specifically mentioned in these Regulations

and establish the necessary impairment in value. Suspension of

interest on non-

performing

credit

accommodations


activities shall place on a non-accrual basis all credit

accommodations which are classified as substandard,

doubtful or loss.

(2) Any accrued but uncollected interest on credit

accommodations placed on non-accrual basis shall be

reversed and placed in suspense. (3) A credit accommodation placed on a non-accrual

basis may be restored to an accrual basis provided the

borrower has regularized the credit accommodation by

timely paying at least four consecutive installments.

Annual

provision

approval by the

Bank


activities shall seek prior approval of the Bank of its

proposed annual provisions for probable losses before

finalization of the annual accounts. (2) An institution engaged in microfinance

activities shall submit to the Bank its draft balance sheet,

profit and loss account, including a detailed account of the

provisions made when seeking approval under sub-

regulation (1).

Fair lending

practices 66. The contract between an institution engaged in

microfinance activities and the borrower, shall state the

interest rate, commissions and fees, either on an annual or a

monthly basis.


GN. No. 298

33

PART VII

GENERAL PROVISIONS

Submission of

monthly report 67. An institution engaged in microfinance

activities shall, not later than the 15th

day following the end

of the reporting quarter, submit to the Bank quarterly

reports on classification and provisioning of credit

accommodations and other risk assets including contingent

accounts. Reporting

requirements 68. An institution engaged in microfinance

activities shall submit returns and reports to the Bank in

the format and frequency prescribed by the Bank. Compliance

with other

Regulations

69. The provisions of-

(a) the Banking and Financial Institutions

(Disclosure) Regulations, 2014;

(b) the Banking and Financial Institutions

(External Auditors) Regulations, 2014;

(c) the Banking and Financial Institutions

(Foreign Exchange Exposure Limits)

Regulations, 2014;

(d) the Banking and Financial Institutions

(Prompt Corrective Action) Regulations,

2014;

(e) the Banking and Financial Institutions

(Internal Control and Internal Audit)

Regulations, 2014; and

(f) the Banking and Financial Institutions

(Physical Security Measures) Regulations,

2014;

shall apply to a microfinance bank.

Sanctions 70.-(1) Without prejudice to penalties and actions

prescribed by law, the Bank may impose on any institution

engaged in microfinance activities any of the following

sanctions for non-compliance- (a) a penalty of the amount to be determined by

the Bank;


GN. No. 298

34

(b) prohibition from declaring or paying

dividends; (c) suspension of the activity to open or establish

new branches; (d) suspension of access to credit facilities of the

Bank; (e) suspension of lending and investment

operations/activities; (f) suspension of capital expenditure; (g) suspension of the privilege to accept new

deposits; (h) revocation of license; (i) suspension from office of the defaulting

director, officer or employee; and (j) disqualification from holding any position or

office in any bank or financial institution

under the supervision of the Bank. (2) The penalty referred to in paragraph (a) of sub-

regulation (1) shall apply to directors, officers or employees

of the institution engaged in microfinance activities. Revocation GN

No. 79 of 2005 71. The Banking and Financial Institutions

(Microfinance Companies and Microcredit Activities)

Regulations, 2005 are hereby revoked.


GN. No. 298

35

______

FIRST SCHEDULE

______

(Made under Regulation 12)

______

CRITERIA FOR DETERMINING THE CHARACTER AND EXPERIENCE REQUIRED FOR A

MEMBER OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT OF A

MICROFINANCE BANK

1. In order to determine, for the purpose of these Regulations, the character and moral

suitability of persons proposed to be members of the Board or senior management, the

Bank shall have regard to the following qualities, in so far as they are reasonably

determinable, of the person concerned-

(a) adequate education background;

(b) general character;

(c) professional skills, competence and soundness of judgment for the fulfilment of

the responsibilities of the office in question; and

(d) the diligence with which the person concerned is likely to fulfil those

responsibilities.

2. For the purpose of and without prejudice to the generality of the provisions of paragraph

(1), the Bank may have regard to the previous conduct and activities of the person

concerned in the business or financial matters and, in particular to evidence that such

person-

(a) has committed any act of bankruptcy;

(b) was a director or in a senior management position of an institution that has been

liquidated or is under liquidation or statutory management;

(c) has committed or been convicted of the offence of fraud or any other offence of

which dishonesty is an element;

(d) has contravened the provision of any law designated for the protection of members

of the public against financial loss due to the dishonesty or incompetence of, or

malpractices by, persons engaged in the provision of banking, insurance,

investment or other financial services.

3. Any other criteria, which the Bank may prescribe, from time to time.

4. The following documents shall be submitted to the Bank with respect to each proposed

director and senior management team, together with other documents the Bank may

require-

(a) detailed curriculum vitae;

(b) certified copies of academic and professional certificates;

(c) photocopy of the pages of the passport which contain personal information

including photograph, nationality, date and place of birth and issuer of the

passport;

(d) two certified passport size photographs; and

(e) references from two persons who are not relatives, vouching for good moral

character, integrity and performance.


GN. No. 298

36

___________

SECOND SCHEDULE

___________


_______

The Governor,

Bank of Tanzania,

P.O. Box 2939,

Dar es Salaam,

TANZANIA.

Re: Application for a Licence to carry out banking business

Sir,

We, the undersigned, hereby apply for a licence to establish a microfinance bank in Tanzania to be

known as ____________________________________with principal place of business at

____________________________________

The proposed bank shall have an authorized share capital of ______________ shillings and paid up

capital of _______________ shillings which shall be contributed by the following subscribers:

Subscribed Shares

Name of

Subscriber

Number Amount Amount

Paid-up

Percentage of

Ownership

1. ___________ ____________ ____________ ____________ ____________

2. ___________ ____________ ____________ ____________ ____________

3. ___________ ____________ ____________ ____________ ____________

4. ___________ ____________ ____________ ____________ ____________

5. ___________ ____________ ____________ ____________ ____________

6. ___________ ____________ ____________ ____________ ____________

7. ___________ ____________ ____________ ____________ ____________

8. ___________ ____________ ____________ ____________ ____________

9. ___________ ____________ ____________ ____________ ____________

10 ___________ ____________ ____________ ____________ ____________

11. ___________ ____________ ____________ ____________ ____________

12. ___________ ____________ ____________ ____________ ____________

13. ____________ _____________ _____________ _____________ _____________

14. ____________ _____________ _____________ _____________ _____________

15. ____________ _____________ _____________ _____________ _____________

16. ____________ _____________ _____________ _____________ _____________

17 ____________ _____________ _____________ _____________ _____________

18. ____________ _____________ _____________ _____________ _____________

19. ____________ _____________ _____________ _____________ _____________

20. ____________ _____________ _____________ _____________ _____________

Total


GN. No. 298

37

We jointly and severally make a firm commitment to deposit a total amount of paid up capital for

the proposed bank with any bank or financial institution registered in Tanzania such deposit to be

made not later than thirty days after grant of this application.

In support of this application, we submit herewith the documents listed in the accompanying

checklist. We certify the correctness of all the information indicated in such documents to the best

of our knowledge and belief.

We hereby authorize the Bank of Tanzania and any of its authorized agents or staff members to

make an enquiry or obtain any information from any source for the purpose of determining the

correctness of all the representations made in connection with this application or of assessing its

merits.

To facilitate communication between us and the Bank, we have authorized ………………. of the

following address:

(1) P.O Box ………..

(2) Telephone number……

(3) Email address……….

(4) Fax number ……….

to represent all of us in regard to this application. It is understood that any notice to him shall

constitute sufficient notice to all of us.

Enclosed is a cheque for Tanzanian Shillings ten million being payment of our application fee.

Yours faithfully,

____________________ _________________________

____________________ _________________________

____________________ _________________________

____________________ _________________________

____________________ _________________________

____________________ _________________________

____________________ _________________________


GN. No. 298

38

______

THIRD SCHEDULE

________


_________

Checklist of Documents

1. Letter of application in the prescribed form.

2. Authenticated legal documents or board resolution authorizing the signatory.

3. Banker’s cheque or any other document acceptable to the Bank evidencing payment of a non-

refundable application fee of ten million shillings or any other amount as may be determined

by the Bank.

4. Proposed Memorandum and Articles of Association (unregistered).

5. Proof of source and availability of funds for investment as capital of the proposed institution.

6. List of subscribers and proposed members of board of directors and Chief Executive Officer.

7. Proof of citizenship of every subscriber and every proposed directors and senior management

officers. This includes detailed curriculum vitae, photocopy of the pages of the passport which

contain personal information and two recent passport size photographs.

8. Audited balance sheet, income statement and cash flow for the last three years, of every

subscriber who owns five per cent or more of the share capital of the proposed institution

engaged in business.

9. Credit reference reports for every significant subscriber and every proposed director and senior

management officer.

10. Certified copies of annual returns of every subscriber who owns five per cent or more of the

share capital of the proposed institution and every proposed member of the board of directors

and Chief Executive Officer together with accompanying schedules or financial statements

filed during the last three years with relevant Authority.

11. Certified copies of tax returns of every subscriber who owns five per cent or more of the

share capital of the proposed institution and every proposed member of the board of

directors and Chief Executive Officer together with accompanying schedules or financial

statements filed during the last three years with relevant Tax authorities together with

respective Tax clearance certificates.

12. Statements from two persons who are not relatives vouching for the good moral character

and financial responsibility of the subscribers who own five per cent or more of the share

capital of the proposed institution and the proposed directors and senior management.


GN. No. 298

39

13. Home Country Regulator Certification if the applicant is a foreign bank or financial

institution.

14. Declaration that the funds to be invested have not been obtained criminally or associated

with any criminal activity.

15. Business plan for the first four years of operations including strategies for growth, dividend

payout policy, career development programme for the staff and budget for the first year.

16. Explicit strategies for outreach through use of branches, agents, mobile banking and other

appropriate channels indicating numbers and locations for the first four years.

17. Projected balance sheets, income statements and cash flow statements for the first four years

of operation.

18. Brief description of economic benefits to be derived by Tanzania and the community from

the proposed microfinance bank.


GN. No. 298

40

__________

FOURTH SCHEDULE __________


__________

General guidelines for preparation of Business plan

1. The business plan should be prepared by the promoters and will be reviewed by the Bank to

determine whether approval should be given to operate a microfinance bank. The plan

should identify the institution's markets, its proposed services, management capabilities,

growth plan, and strategies for profitability.

2. The business plan should present data, which accurately reflect the economic condition of

the delineated market and address statutory and regulatory changes, which may affect the

operations of the proposed microfinance bank. Proposal should reflect the realities of the

market place.

3. A business plan should contain sufficient information to demonstrate that the proposed

microfinance bank has reasonable likelihood of success. In this regard a detailed listing of

all assumptions such as used in preparing the business plan should be attached to the

submission (e.g. a margin analysis and cost of funds). Therefore, organizers must ensure

that the business plan projections are well supported and goals and objectives are properly

defined on initial submission.

Market Analysis

4. Analyse the market to be served. Describe the market in which you expect to provide

services in terms of economic characteristics for example size, income and industry

patterns. Include anticipated changes in the market, the factors influencing those changes,

and the effect they will have on the proposed institution. To the extent necessary for

making business decision, describe differences in the product market to be served for

example, differences in the depository and credit market. Analysis will be based on use of

the most current economic data available. Sources of information used are reviewed for

credibility and are important in reviewing the data.

5. Analyse the competition. List the competitors inside the market to be served, those outside

who might affect the markets served and any potential competition. Give your perception

and analysis of the market strategies and expected results in terms of relative strength,

market shares and prices.

6. Explain the strategies you will follow to capture a share of each product market and the

results you expect to achieve. Use a sample format to present a summary of your

expectations.


GN. No. 298

41

Plans and Objectives

7. Review major planning assumptions used in the analysis and in setting the plans and

objectives for a new institution. Include at least the following market growth, interest rates,

cost of funds and competition.

8. Projections should show the expected asset and liability mix, volume for each type of

services, fixed asset investments and officer and staff remuneration. Projections must be

based on the planning assumptions which must be submitted as part of the application,

market analysis, and strategies discussed above. Discuss the advantages and disadvantages

of the proposed asset/liabilities mix, including a net interest margin analysis, and any

actions which will be taken to reduce major risks through appropriate funds management

techniques and systems.

9. Discuss the formula or basis used to arrive at the proposed capital structure and an

explanation of why the promoters believe the proposed amount is sufficient in light of given

market factors, strategies, and expenses. Promoters are expected to raise an amount

sufficient to effectively compete in the market are and adequately support planned

operations in addition to all organizational expenses. The Bank may require a higher

amount to maintain capital adequacy to support operations projected through the end of the

institution’s fourth year.

10. Discuss plans for raising capital initially and to finance growth within the first four years.

Explain how the plans will keep the institution in conformity with the Banking and

Financial Institutions (Capital Adequacy) Regulations specifically addressing compliance

with the risk-based capital guidelines.

Credit Policy and Procedures

11. Credit policies are a set of broad statements establishing the concept and objective

parameters for type, limits for maturities, loan pricing criteria client and collateral standards

to be fulfilled by borrowers, aggregate and individual concentration limits, and loan

authority and procedures for collection and charge-offs.

12. Credit manual must be prepared comprising of detailed guidelines for implementing the

stated policies. The manual generally will address types of business desired, proper

borrower financial information; credit files maintenance; enforcement of repayment

schedules; and periodic review and other reports to be generated and distributed.

13. Credit policies and manuals need to cover all the steps of credit production and

administration which include initiation, investigation and analysis, procedures for approval,

renewals and extensions, documentation, perfection of collateral, funds disbursement and

recovery.

14. The structure should in principle reflect the nature and scope of the intended activities of the

institution and the mechanism by which the management envisages to govern the institution

and to monitor as to what extent the objectives of the institution are achieved.

15. The structure should show the relationships between the board and management. It should

also show the composition of various departments of the institution. The structure should

also indicate the number of staff envisaged for each unit. Support units such as internal

audit, legal services and others should be indicated.


GN. No. 298

42

16. The promoters should be able to show the names of specific persons that are envisaged to

take certain key positions in the institution. If the actual persons cannot yet be identified,

promoters should indicate the requirement clearly in terms of training, experience and

personal characteristics.

17. Promoters are required to disclose how the proposed microfinance bank will develop the

professional and technical skills of their staff and Tanzanians will be employed, trained and

occupy positions of senior or managerial ranks in the institution. All future plans should be

indicated.

Financial Projections

18. Promoters must prepare projected balance sheets, income statements and cash flow

statements. They must submit statements that reflect their assets, liabilities, and capital

projections for the number of years projected to reach profitability; however, a minimum of

four years must be displayed.

19. At a minimum, the information in the following forms must be provided. Additional data

should be included to reflect important element of your planned asset and liability mix for

example, the loan and deposit schedules might be expanded. Average balances, rather than

year-end estimates, should be used. Average balances may be computed by projecting

monthly or quarterly account balances and averaging (annualizing) for the appropriate

number of periods used.


GN. No. 298

43

PROJECTED BALANCE SHEET

[In’000 Tanzanian Shillings]

PARTICULARS Year

1

Year

2

Year

3

Year

4

Assets

Cash

Balances with Bank of Tanzania

Balances with other bank or financial

institutions

- in Tanzania

- abroad

- investment in debt

securities

- Treasury bills

- Other Securities (use

separate schedule]

Loans, Advances and Overdrafts (Net]

- loans and Advances

- overdrafts

- allowance for losses (as

a deduction]

Bank Premises, Furniture and

Equipment

- use separate schedule]

Other Assets (Use separate schedule]

TOTAL ASSETS

Liabilities

Deposit liabilities other than banks

- current accounts

- savings deposits

- time deposits

Deposits from other bank or financial

institutions

- in Tanzania

- abroad

- other deposits (use separate

schedule]

Total deposits

Other liabilities (use separate schedule]

Capital

- paid-up capital

- Ordinary

- preference

reserves


GN. No. 298

44

PARTICULARS Year

1

Year

2

Year

3

Year

4

- share premium (discount]

- retained earnings

- capital reserves

- others (specify]

Total Equity

TOTAL LIABILITES AND CAPITAL

Off-balance sheet commitments


GN. No. 298

45

PROJECTED INCOME STATEMENTS


PARTICULARS Year

1

Year

2

Year

3

Year

4

Total Interest Income

Interest Expenses

- deposits (use separate

schedule]

- borrowings

- Others (specify]

Total Interest Expenses

NET INTEREST INCOME

Provision for loan losses

Bad debt written off

Non-Interest Income

- foreign exchange

gain/losses

- commission and fees (use

separate schedule]

- others (use separate

schedule]

Total Non- Interest Income

Non-Interest Expenses

- officers’ salaries and

benefits

- employees’ salary and

benefits

- depreciation expenses

- maintenance costs

- others (use separate

schedule]

Total Non-Interest Expenses

Operating Income (Losses]

Extra Ordinary Income/Losses (specify]

Net Income/Loss before Income Tax

Income taxes

Net Income/Loss after tax


GN. No. 298

46

PROJECTED CASH FLOW STATEMENTS


PRACTICE Year

1

Year

2

Year

3

Year

4

Part 1 Cash flow from operating activities

Net Income (Loss]

Adjustments to reconcile income

- provisions

- net change in loans and

advances

- gains/Loss on sale of assets

- net change in deposits

- net change in short-term

negotiable securities

- net change in other

liabilities

- net change in other assets

- others (specify]

Net cash provided (used) by operating

activities

Part II

Cash flow from investing activities

- dividend received

- purchases of fixed assets

- purchases of investment

securities

- proceeds from sales of

investment securities

- others (specify)

Net cash provided (used) by investing

activities

Part III

Cash flow from financing activities

- Repayment of long-term

debt

- Proceeds from issuance of

long-term debt

- Proceeded from issuance of

share capital

- Proceeds from sale of fixed

assets

- Payment of cash dividends

- Net change in other

borrowings

- Others (specify]

-


GN. No. 298

47

PRACTICE Year

1

Year

2

Year

3

Year

4

Net Cash provided (used) by financing

activities

Part IV

Cash and Cash Equivalents

Net decrease/increase in cash and cash

equivalents

- Cash and Cash equivalents

at the beginning of the year

- Cash and Cash equivalents,

current year-to-date


GN. No. 298

48

_________

FIFTH SCHEDULE

_________


_________

Questionnaire for Directors and Senior Managers of Microfinance Bank

Part I: Instructions for Filling the Questionnaire

i. This Questionnaire should be filled in duplicate by each director and senior manager of a

microfinance bank.

ii. This form is to be completed in English. Any documents required are to have a certified

English translation appended.

iii. Answers to ALL questions should be TYPED or written in INK and in BLOCK LETTERS.

iv. No question should be left unanswered. Where the Applicant believes that a question does

not apply, the Applicant should write “Not Applicable” or “N/A”.

v. If there is insufficient space to answer a question, additional information may be provided on

an attachment page and identify the continuation of an answer by stating the question

number.

vi. All dates should be completed in the form: Day / Month / Year

vii. All amounts are to be recorded in Tanzanian Shilling (TZS). Conversion from foreign

currency should be made using the current exchange rate.

viii. Please ensure that all answers and information are true and correct. Failure to do so

constitutes a criminal offence and can lead the Bank to reject an application or disqualify a

director or senior manager who has been cleared on the basis of untrue or incorrect

information.

ix. The following documents shall be submitted to the Bank with respect to each proposed

director and senior management team, together with other documents the Bank may require-

(a) certified copies of academic and professional certificates;

(b) photocopy of the Tanzania national identity card or pages of the passport which contain

personal information including photograph, nationality, date and place of birth and

issuer of the passport;

(c) two certified passport size photographs; and

(d) references from two persons who are not relatives, vouching for good moral character,

integrity and performance.


GN. No. 298

49

x. The completed application form and any supporting material, should be submitted to the office of:

Director of Banking Supervision

Bank of Tanzania

P.O.Box 2939

Dar-es-Salaam

NOTE: Failure to disclose and submit all necessary information may lead to the Bank of Tanzania

rejecting the application


GN. No. 298

50

Part II: Personal Particulars

1. Name of the microfinance bank in

connection with the application

2. Surname

3. First Name(s)

4. Middle Name

5. Have you been known by any previous

name(s)?

6. Are there any names by which you are

also known as?

7. Date of Birth

8. Place of Birth

9. Position to be held in the microfinance

bank.

10.For Chairman and Non-Executive

Directors only:

(a)How much time do you give, or

(if a new appointment) do you

anticipate giving in every

month, to the business of the

microfinance bank?

(b) What particular contribution do

you consider that you bring, or

(if new appointment) you will

bring, to the work of the license

holder?

Affix passport size

photographs

(2 Copies)


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51

11.National Identity Number

and/or National Insurance

number and/or Social

Security number. Please tick

and provide identification

number below. Attach a

certified copy of the social

security identity card and or

national insurance identity

card appropriately.

National Identity

Number

□ National Insurance

Number

□

Social

Security

Number

□

12. Nationality (ies): Please state

how nationality (ies) was

acquired, e.g. by birth,

naturalisation or marriage. If

acquired by naturalisation or

marriage, indicate previous

nationality.

Birth

□

Naturalization

□

Marriage

□

13.Please attach a certified copy of the Tanzania national identity card.

Or pages of your passport(s) which contain personal information including photograph,

nationality, date and place of birth and issuer of the passport;

14.List below your official and residential addresses. If you have had any other addresses during

the last 5 years, indicate them as well as relevant dates.

Dates Residential Address Official Address

Block/Plot number…………

Street………………

Postal Address………….

District/Town……………

City…………………………

Country……………………

Name of the

Organization…..

Block/Plot

number…………



District/Town…………

…

City……………………

……

Country………………

……





City…………………………


Name of the

Organization…..

Block/Plot

number…………




…

City……………………

……


……


GN. No. 298

52





City…………………………


Name of the

Organization…..

Block/Plot

number…………




…

City……………………

……


……

Part III: Academic Qualifications

15.Details of academic qualifications and the year in which they were obtained. (E.g. Certificate,

Diploma, Degree, Master’s Degree,, etc.…). Please provide certified true copies of

certificates in relation to the qualifications obtained.

Qualification Educational Establishment / Awarding

Body Year Obtained

Part IV: Professional Qualifications

16.Details of any professional qualifications and the year in which they were obtained (E.g.

ACA, ACCA, ACIB etc…). Please provide certified true copies of certificates in relation

to the qualifications obtained.

Membership No. Professional Qualification Year Obtained


GN. No. 298

53

Part V: Professional Membership

17.Details of current membership of any relevant professional bodies, their contact details and

year of admission (e.g. Institute of Directors, Institute of Management, etc…)

Membership

No

Professional

Body’s Name

and Contact

Details

Levels of

Memberships

(e.g.

Associate,

Fellow,

Member)

Year Admitted

Status of

membership (e.g.

active or inactive)

Part VI: Employment History

18.Beginning with your present occupation or employment, please list all occupations and

employment. If self-employed please indicate “SELF EMPLOYED” (NB: The Bank may

seek references from previous employers.)

Name / Address of employer Nature of

Business Position Held Relevant Dates

Percentage

of

ownership

(For self-

employed

only)

Name of the

Organization…..





City…………………………



GN. No. 298

54

Name of the

Organization…..





City…………………………


Name of the

Organization…..





City…………………………


Part VII: Directorships

19. Beginning with your present directorship, please list all directorships

Company

Name

Company’s nature of

business

Incorporation

Number

Country of

Registration

Relevant

Date


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55

20.Have you ever been involved in any litigation?

Yes

No

If yes, provide details including any judgment;

If any of the answers to questions 21 to 32 are “Yes”, please give full particulars on a separate sheet of

paper clearly stating the number of the question to which the details relate. Please note that no time

restrictions apply to the matters you are asked to disclose. Any convictions and other facts must be stated.

21.Have you or any other body corporate, partnership or unincorporated

institution to which you are, or have been associated with as a director,

senior manager, or officer ever applied for banking business to any

jurisdiction for a license or other authority to carry on banking business

or other related business (e.g. insurance, mortgage finance, lease

finance, development finance, etc.) , regardless of whether the

application was successful.

Yes □

No □

22.Have you or at any time been convicted of any criminal offence? If so, give

full details of court by which you were convicted, the offence and the

penalty imposed and the date of conviction.

Yes □

No□

23.Have you or any body corporate, partnership or unincorporated institution

to which you are, or have been associated with as a director, senior

manager, or officer been subject of an investigation by a government,

professional or other regulatory body?

Yes □

No □

24. Have you ever been subject of a disciplinary enquiry? Yes □

No □

25.Have you ever been suspended from any office or asked to resign?

Yes □

No □

26.Have you been dismissed from any office of employment or barred from

entry to any profession or occupation?

Yes □

No □

27.Have you ever been disqualified from acting as a director of a company, or

from acting in the management or conduct of the affairs of the company,

partnership or unincorporated company?

Yes □

No □

28.Have you ever been adjudged bankrupt by a court, or entered into any

compromise with creditors, or are you currently the subject of

bankruptcy proceedings? Are you aware of any such proceedings

pending?

Yes □

No □

29. Have you ever failed to honor any credit obligation as borrower of any

bank or financial institution or other money lending institution?

Yes □

No □


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56

30. Have you failed to satisfy any debt adjudged due and payable by you as a

judgment-debtor under an order of a court?

Yes □

No □

31. Have you in connection with the formation or management of any body

corporate, partnership or unincorporated institution been adjudged by a

court civilly liable for any fraud misfeasance or other misconduct by

you towards such a body or company or towards any members thereof?

Yes □

No □

32. Has any body corporate, partnership or unincorporated institution with

which you were associated as a director, senior manager or officer been

compulsory wound up or made any compromise or arrangement with

creditors or ceased trading in circumstances where its creditors did not

receive or have not yet received full settlement of their claims.

Yes □

No □

33.In carrying out your duties, will you be acting on the directions or

instruction of any other person?

Yes □

No □

Part VIII: Referees

34. State the name, address and occupation of two persons who are not relatives, vouching

for your good moral character, integrity and performance of whom the Bank may

enquire regarding their character and reputation.


GN. No. 298

57

DECLARATION BY THE APPLICANT

I, ....................................................................................................... hereby declare the following:

This questionnaire consists of.......... pages, each signed by me.

The content of this declaration is true to the best of my knowledge and belief. I am aware that

should any information submitted herein be false, I may be liable to prosecution. I undertake, that

for as long as I continue to be a director or executive officer of the institution, I will notify the

Bank of any material changes to, or affecting the completeness or accuracy of, the information

supplied by me as soon as possible, but in any event not later than 21 days from the day that the

changes come to my attention. I know and understand the content of this declaration. I have/do not

have* objections to taking the prescribed oath. I consider the prescribed oath to be binding /not

binding* on my conscience.

_________________________

SIGNATURE OF APPLICANT

I certify that the above statement was taken by me and that the deponent has acknowledged that

he*/she knows and understands the content of this statement. This statement was sworn

to*/affirmed before me and the deponent's signature was placed thereon in my presence at

.............................................on this ............day of ................ two thousand and ................... .......

__________________________________

COMMISSIONER OF OATHS

FULL NAMES: __________________________________________

ADDRESS: ______________________________________________

* Delete whichever is not applicable

58

Checklist

Below is a checklist that has been designed to assist applicants to ensure that all of the information

required by the Bank has been submitted.

Has the Personal Questionnaire form been filled out in full?

□

Certified copy of pages of passport which contain personal

information including photograph, nationality, date and place

of birth and issuer of the passport or Tanzania national

identity card.

□

Certified copy of the social security identity card and or

national insurance identity card

□

Copies of stated academic qualifications

□

Copies of stated professional qualifications

□

Copies of stated membership to professional bodies

□

Past Employment references

□

List of Directorships (if applicable)

□

59

_________

SIXTH SCHEDULE

_________


___________

KEY POLICIES

The key policies referred to under regulation 17 of these Regulations include-

S/No. Type of Policy

1 Risk Management Policy

2 Credit Risk Management Policy

3 Liquidity Risk Management Policy

4 Market Risk Management Policy

5 Operational Risk Management Policy

6 Strategic Risk Management Policy

7 Compliance Risk Management Policy

8 Human Resource Management Policy

9 Accounting Policy (Including Fixed Assets Policy)

10 Audit Policy (Including Internal And External Audits)

11 Asset/Liability Management Policy (Including Investment Policy)

12 Information And Communication Technology Policy

13 Business Continuity Management Policy

14 Anti-Money Laundering (AML) And Combating Financing of Terrorism

(CFT) Policy

15 Physical Security Policy

16 Outsourcing Policy

Dar Es Salaam, BENNO J. NDULU,

…………………., 2014 Governor